5 ms·

I was recently offered a founding role. The cofounder is 14 years younger than I. I have a family of 5, she is single and living on a very light income. Her adv

I was recently offered a founding role. The cofounder is 14 years younger than I. I have a family of 5, she is single and living on a very light income. Her advisers were telling her founders should pay themselves an amount that was approximately 1/3 of my current take-home. The divide in stage of life and accumulated responsibility was just too great to overcome and we parted ways.

mywittyname 5y ago
This seem so penny wise, pound foolish to me. Assuming the long-term value difference between a great founder and a mediocre one can be tens or hundreds of millions of dollars, it really makes sense to spend the extra few hundred thousand on the best cofounder available.
- hwers 5y ago
  To me it's a sign of a lack of confidence in that long-term evaluation and is probably a sign they don't have the right risk attitude to be in the startup game to begin with.
  - SmellTheGlove 5y ago
    And to me its a sign of not understanding and/or not valuing what an extra decade and a half of experience brings to the table. Paying that cofounder more based on their stage in life is a requisite to acquiring that experience. They're both bearing the same risk, it's just quantified differently for two people in two different life situations.
    - newaccount74 5y ago
      I guess it depends very strongly whether the startup needs that experience or not. And to be honest, the kind of experience that someone who worked 15 years as a developer brings to the table is probably not going to be the kind of experience that makes or breaks a startup. Experienced devs can bring much more value at later stage companies, where they can focus on the thing they are good at, rather than at an early stage startup where the founders have a million different responsibilities.
      - SmellTheGlove 5y ago
        > I guess it depends very strongly whether the startup needs that experience or not. Well, this is in response to a post that said they had an offer, so my presumption here is that the startup needed that experience or they wouldn't have offered the role. > And to be honest, the kind of experience that someone who worked 15 years as a developer The original post didn't specify whether they were a developer, only that they were 15 years older than the other co-founder. I'm making my own assumption about that translating into 15 more years experience (not accounting for breaks, back to school, whatever).
      - jokethrowaway 5y ago
        Having a developer with experience or one without is the kind of thing that can break a startup. If you try to get a single junior developer to ship the product... well, good luck with that. I can count on one hands the people in my circle who could do that fresh out of university. You definitely need at least a mid developer who shipped something else - of you can just outsource the tech side. When my startup was incubated there were plenty of biz founder with a junior who couldn't ship something simple (even a wordpress with some plugins would have worked!) or ended up outsourcing their development (which ended up being a way to make some income when my startup didn't go anywhere).
      - gedy 5y ago
        > And to be honest, the kind of experience that someone who worked 15 years as a developer brings to the table is probably not going to be the kind of experience that makes or breaks a startup. Hard disagree here, as many many junior devs treat startup/greenfield work as their personal playground for trying esoteric tech, prematurely building their own platform, etc.
      - andrew_ 5y ago
        I would argue that your take doesn't apply to T-shaped engineers, or engineers that have been in the industry through a multitude of technology shifts and trends.
    - PragmaticPulp 5y ago
      > Paying that cofounder more based on their stage in life is a requisite to acquiring that experience. The primary compensation for a founder position is the equity stake. A co-founder would get substantial equity (20% or more). For perspective, consider that future investors will be pouring millions of dollars into the company in exchange for a similarly sized equity stake. You need to remember that as a co-founder, they're deciding what to pay themselves. The higher the base compensation, the less runway they have and the fewer employees they can hire. If someone is demanding a $450K/year base compensation as a co-founder, they're not looking at this as a true co-founder role. A co-founder would want to focus on equity and take something like $150K/year so the company could hire 1-2 additional engineers with the other $300K/year. If this sounds weird or unfair, then you're probably not a good fit for a co-founder role. And that's fine! For most people, taking the $450K-$600K big tech is the better choice. Not everyone is cut out for the risk-taking of a co-founder role.
      - SmellTheGlove 5y ago
        > If someone is demanding a $450K/year base compensation as a co-founder, they're not looking at this as a true co-founder role. A co-founder would want to focus on equity and take something like $150K/year so the company could hire 1-2 additional engineers with the other $300K/year. I think we're both making some assumptions around what GP was offered, but I would agree with you that asking for $450k as a cofounder is unreasonable. But I'd say that for someone closer to middle age with a family, $200k isn't unreasonable. The idea is that you want the cofounder to focus on the company, so you remove the financial distraction. > Not everyone is cut out for the risk-taking of a co-founder role. Sure, but that's not what I'm talking about here. I'm saying that you should not expect your co-founder and their kids to live on ramen. If you want the experience they offer, you gotta pay their bills. It's not about extravagance, it's just the cost of mitigating the same risk that the 20-something cofounder faces and mitigates with their own salary. It just costs more to do it with someone who is a little further along in life.
        PragmaticPulp 5y ago
        > I think we're both making some assumptions around what GP was offered, but I would agree with you that asking for $450k as a cofounder is unreasonable. But I'd say that for someone closer to middle age with a family, $200k isn't unreasonable. The idea is that you want the cofounder to focus on the company, so you remove the financial distraction. That's basically what I said in my other comment above, right down to the same $200K number: https://news.ycombinator.com/item?id=30517360 https://news.ycombinator.com/item?id=30517360 The parent commenter responded that they don't like startups at all due to the high failure rate. Between that and the unwillingness to give up immediate compensation, I think it's likely that they just don't really want to be a startup co-founder. Nothing wrong with that, but it's not really cool to blame a startup for having expectations in line with standard startup practices (assuming they weren't offering $50K or something silly)
- ngold 5y ago
  Personally, if you spend several years. Make sure your ceo pay is at least a million the first year. Pay for your time and if it all goes south, a couple months of developer pay to try something new.
jedberg 5y ago
It probably wouldn't have worked out well anyway. Your cofounder would have been upset the first time you spent time with your kids instead of working. Founders need to be in roughly the same life stage for things to work out, or if not, have a very strong understanding of what the other person's work life balance is. Or at least the one without kids needs to have very involved hobbies to spend time on when you spend time with your kids!
- robotresearcher 5y ago
  Eric Schmidt, Larry & Sergey are a counterexample. (But a runaway success is a poor model for expected outcome.)
  - jedberg 5y ago
    How are they a counterexample? Larry and Sergey were both grad students in the same place in life. Eric was hired after they had funding and profits and was not a cofounder.
    - robotresearcher 5y ago
      Ah, thanks for the correction. I didn't recall there was 4 years between startup and Schmidt joining. He says in the linked interview there were ~150 employees when he joined. https://www.freshworks.com/hrms/eric-schmidt-talks-about-what-worked-and-what-didnt-while-scaling-up-google-part-i-blog/ https://www.freshworks.com/hrms/eric-schmidt-talks-about-wha...
PragmaticPulp 5y ago
The missing piece of this scenario is your current take-home. If you're pulling in $600K at a BigCo then it's not really reasonable to expect an early founder role to match that compensation and give you substantial (10-20% or more) equity in a new startup. Giving a founder $200K in the early days should be enough to let them focus on the startup and not worry about finances. If someone is in a personal position where something like $200K/year would cause great financial stress, they're probably not a good fit for a high-risk startup founding position anyway. OTOH, if you were making $200K and the startup insisted you drop to $70K/year, that's just short-sighted on their part. Especially in this generous funding environment it doesn't make any sense to squeeze founders with tiny salaries. The life stage and family differences are indeed a big gap, but I think the career stage differences would have also been insurmountable. Once you're a decade or two into a career and you have a comfortable position at a big company, it's really difficult to shift back into scrappy startup founder mode. To be clear: There's absolutely nothing wrong with taking well-paid roles at big companies. It's actually a great option, and it's fantastic that we can get paid so much without taking on the risks of a startup. There's not really a right or wrong answer in this job decision.
- robocat 5y ago
  I suspect most founders do not account for their opportunity cost correctly. For example: two founders, one innovator at $150k current wages, and one tech at $350k. They work earning $0 each, spending their savings for one year, and then get a seed round of $1 million. Even though they have invested $500k equivalent at the highest risk they will only get common shares in their first round, so their cash-equivalent investment is usually highly undervalued. The standard VC return is looking for 30x return over 10 years (from their one successful investment out of 10 companies). The standard VC returns represent the best approximation to investment risk. However founders have higher variance (one company) and they don’t get preferential shares, so founders need far more than 30x return (much greater than $15 million) to even break even on their risk because they are highly leveraged due to common shares. Only 5% of VC funds even achieve fair returns, so founders are even more fucked than you might think. Edit: although wages are less in most countries, I expect the risk for founders is actually higher. Investment amounts are smaller, less chance of outstanding company success, and investors seem to really screw up the companies they invest in (from my experience in NZ watching other companies that took VC or seed investment).

mywittyname 5y ago

This seem so penny wise, pound foolish to me. Assuming the long-term value difference between a great founder and a mediocre one can be tens or hundreds of millions of dollars, it really makes sense to spend the extra few hundred thousand on the best cofounder available.

hwers 5y ago
To me it's a sign of a lack of confidence in that long-term evaluation and is probably a sign they don't have the right risk attitude to be in the startup game to begin with.
- SmellTheGlove 5y ago
  And to me its a sign of not understanding and/or not valuing what an extra decade and a half of experience brings to the table. Paying that cofounder more based on their stage in life is a requisite to acquiring that experience. They're both bearing the same risk, it's just quantified differently for two people in two different life situations.
  - newaccount74 5y ago
    I guess it depends very strongly whether the startup needs that experience or not. And to be honest, the kind of experience that someone who worked 15 years as a developer brings to the table is probably not going to be the kind of experience that makes or breaks a startup. Experienced devs can bring much more value at later stage companies, where they can focus on the thing they are good at, rather than at an early stage startup where the founders have a million different responsibilities.
    - SmellTheGlove 5y ago
      > I guess it depends very strongly whether the startup needs that experience or not. Well, this is in response to a post that said they had an offer, so my presumption here is that the startup needed that experience or they wouldn't have offered the role. > And to be honest, the kind of experience that someone who worked 15 years as a developer The original post didn't specify whether they were a developer, only that they were 15 years older than the other co-founder. I'm making my own assumption about that translating into 15 more years experience (not accounting for breaks, back to school, whatever).
    - jokethrowaway 5y ago
      Having a developer with experience or one without is the kind of thing that can break a startup. If you try to get a single junior developer to ship the product... well, good luck with that. I can count on one hands the people in my circle who could do that fresh out of university. You definitely need at least a mid developer who shipped something else - of you can just outsource the tech side. When my startup was incubated there were plenty of biz founder with a junior who couldn't ship something simple (even a wordpress with some plugins would have worked!) or ended up outsourcing their development (which ended up being a way to make some income when my startup didn't go anywhere).
    - gedy 5y ago
      > And to be honest, the kind of experience that someone who worked 15 years as a developer brings to the table is probably not going to be the kind of experience that makes or breaks a startup. Hard disagree here, as many many junior devs treat startup/greenfield work as their personal playground for trying esoteric tech, prematurely building their own platform, etc.
    - andrew_ 5y ago
      I would argue that your take doesn't apply to T-shaped engineers, or engineers that have been in the industry through a multitude of technology shifts and trends.
  - PragmaticPulp 5y ago
    > Paying that cofounder more based on their stage in life is a requisite to acquiring that experience. The primary compensation for a founder position is the equity stake. A co-founder would get substantial equity (20% or more). For perspective, consider that future investors will be pouring millions of dollars into the company in exchange for a similarly sized equity stake. You need to remember that as a co-founder, they're deciding what to pay themselves. The higher the base compensation, the less runway they have and the fewer employees they can hire. If someone is demanding a $450K/year base compensation as a co-founder, they're not looking at this as a true co-founder role. A co-founder would want to focus on equity and take something like $150K/year so the company could hire 1-2 additional engineers with the other $300K/year. If this sounds weird or unfair, then you're probably not a good fit for a co-founder role. And that's fine! For most people, taking the $450K-$600K big tech is the better choice. Not everyone is cut out for the risk-taking of a co-founder role.
    - SmellTheGlove 5y ago
      > If someone is demanding a $450K/year base compensation as a co-founder, they're not looking at this as a true co-founder role. A co-founder would want to focus on equity and take something like $150K/year so the company could hire 1-2 additional engineers with the other $300K/year. I think we're both making some assumptions around what GP was offered, but I would agree with you that asking for $450k as a cofounder is unreasonable. But I'd say that for someone closer to middle age with a family, $200k isn't unreasonable. The idea is that you want the cofounder to focus on the company, so you remove the financial distraction. > Not everyone is cut out for the risk-taking of a co-founder role. Sure, but that's not what I'm talking about here. I'm saying that you should not expect your co-founder and their kids to live on ramen. If you want the experience they offer, you gotta pay their bills. It's not about extravagance, it's just the cost of mitigating the same risk that the 20-something cofounder faces and mitigates with their own salary. It just costs more to do it with someone who is a little further along in life.
      - PragmaticPulp 5y ago
        > I think we're both making some assumptions around what GP was offered, but I would agree with you that asking for $450k as a cofounder is unreasonable. But I'd say that for someone closer to middle age with a family, $200k isn't unreasonable. The idea is that you want the cofounder to focus on the company, so you remove the financial distraction. That's basically what I said in my other comment above, right down to the same $200K number: https://news.ycombinator.com/item?id=30517360 https://news.ycombinator.com/item?id=30517360 The parent commenter responded that they don't like startups at all due to the high failure rate. Between that and the unwillingness to give up immediate compensation, I think it's likely that they just don't really want to be a startup co-founder. Nothing wrong with that, but it's not really cool to blame a startup for having expectations in line with standard startup practices (assuming they weren't offering $50K or something silly)
ngold 5y ago
Personally, if you spend several years. Make sure your ceo pay is at least a million the first year. Pay for your time and if it all goes south, a couple months of developer pay to try something new.

jedberg 5y ago

It probably wouldn't have worked out well anyway. Your cofounder would have been upset the first time you spent time with your kids instead of working. Founders need to be in roughly the same life stage for things to work out, or if not, have a very strong understanding of what the other person's work life balance is. Or at least the one without kids needs to have very involved hobbies to spend time on when you spend time with your kids!

robotresearcher 5y ago
Eric Schmidt, Larry & Sergey are a counterexample. (But a runaway success is a poor model for expected outcome.)
- jedberg 5y ago
  How are they a counterexample? Larry and Sergey were both grad students in the same place in life. Eric was hired after they had funding and profits and was not a cofounder.
  - robotresearcher 5y ago
    Ah, thanks for the correction. I didn't recall there was 4 years between startup and Schmidt joining. He says in the linked interview there were ~150 employees when he joined. https://www.freshworks.com/hrms/eric-schmidt-talks-about-what-worked-and-what-didnt-while-scaling-up-google-part-i-blog/ https://www.freshworks.com/hrms/eric-schmidt-talks-about-wha...

PragmaticPulp 5y ago

The missing piece of this scenario is your current take-home. If you're pulling in $600K at a BigCo then it's not really reasonable to expect an early founder role to match that compensation and give you substantial (10-20% or more) equity in a new startup. Giving a founder $200K in the early days should be enough to let them focus on the startup and not worry about finances. If someone is in a personal position where something like $200K/year would cause great financial stress, they're probably not a good fit for a high-risk startup founding position anyway. OTOH, if you were making $200K and the startup insisted you drop to $70K/year, that's just short-sighted on their part. Especially in this generous funding environment it doesn't make any sense to squeeze founders with tiny salaries. The life stage and family differences are indeed a big gap, but I think the career stage differences would have also been insurmountable. Once you're a decade or two into a career and you have a comfortable position at a big company, it's really difficult to shift back into scrappy startup founder mode. To be clear: There's absolutely nothing wrong with taking well-paid roles at big companies. It's actually a great option, and it's fantastic that we can get paid so much without taking on the risks of a startup. There's not really a right or wrong answer in this job decision.

robocat 5y ago
I suspect most founders do not account for their opportunity cost correctly. For example: two founders, one innovator at $150k current wages, and one tech at $350k. They work earning $0 each, spending their savings for one year, and then get a seed round of $1 million. Even though they have invested $500k equivalent at the highest risk they will only get common shares in their first round, so their cash-equivalent investment is usually highly undervalued. The standard VC return is looking for 30x return over 10 years (from their one successful investment out of 10 companies). The standard VC returns represent the best approximation to investment risk. However founders have higher variance (one company) and they don’t get preferential shares, so founders need far more than 30x return (much greater than $15 million) to even break even on their risk because they are highly leveraged due to common shares. Only 5% of VC funds even achieve fair returns, so founders are even more fucked than you might think. Edit: although wages are less in most countries, I expect the risk for founders is actually higher. Investment amounts are smaller, less chance of outstanding company success, and investors seem to really screw up the companies they invest in (from my experience in NZ watching other companies that took VC or seed investment).